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LKP Finance Ltd.

BSE: 507912 Sector: Financials
NSE: LKPMERFIN ISIN Code: INE724A01017
BSE 00:00 | 03 Aug 53.00 3.00
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NSE 05:30 | 01 Jan LKP Finance Ltd
OPEN 52.00
PREVIOUS CLOSE 50.00
VOLUME 100
52-Week high 98.95
52-Week low 46.40
P/E
Mkt Cap.(Rs cr) 67
Buy Price 50.00
Buy Qty 1000.00
Sell Price 52.50
Sell Qty 200.00
OPEN 52.00
CLOSE 50.00
VOLUME 100
52-Week high 98.95
52-Week low 46.40
P/E
Mkt Cap.(Rs cr) 67
Buy Price 50.00
Buy Qty 1000.00
Sell Price 52.50
Sell Qty 200.00

LKP Finance Ltd. (LKPMERFIN) - Auditors Report

Company auditors report

To the Members of

LKP Finance Limited

Report on the audit of financial statements

1. Opinion

We have audited the accompanying financial statements of LKP Finance Limited (‘theCompany') which comprise the balance sheet as at 31 March 2019 the statement of profitand loss the statement of cash flows for the year then ended and a summary of thesignificant accounting policies and other explanatory information (herein after referredto as "financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by the Actin the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as at 31March 2019 and its profit and its cash flows for the year ended on that date.

2. Basis for opinion

We conducted our audit of the financial statements in accordance with the Standards onAuditing (SAs) prescribed under Section 143(10) of the Companies Act 2013 ("theAct"). Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

3. Key Audit matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current year. These matterswere addressed in the context of our audit of the interim financial statements as a wholeand in forming our opinion thereon and we do not provide a separate opinion on thesematters.

Key Audit Matter Response to Key Audit Matter
Evaluation of Other income of Rs 30 crores The Company had during the year assigned non performing assets written off in earlier years to a related party. Principal Audit Procedures We obtained the relevant assignment deeds entered into by the Company for assignment of four Non- Performing Assets (NPA's). These NPA's had been written off in earlier years.
The Company has also received shareholders' approval vide resolution dated 20 March 2018 for assignment of these accounts to a related party with a total consideration of Rs 30 crores.
The consideration on assignment has been received from the related party during the year
We have considered and exercised our professional judgement and concluded that the amount is recognized as other income
Non recognition of Deferred tax assets on carried forward tax losses and MAT credit entitlement. We have considered the recoverability of such deferred tax assets on tax losses carried forward and MAT credit entitlement as a key audit matters due to the importance of management's estimation and judgment and the materiality of amounts at stake.
The Company's ability to recover deferred tax assets and MAT credit entitlement are assessed by management at the close of each financial year taking into account availability of sufficient future taxable income. We reviewed the evaluation process of deferred tax assets on tax losses carried forward and MAT credit entitlement implemented by the Management.
We assessed the permanence of methods used the relevance and consistency of underlying assumptions (like earnings growth and applicable tax rates) and tested the arithmetic accuracy.
We assessed the probability that the company may not use in the future its deferred tax assets and MAT credit entitlement particularly with regard to the ability of the Company to generate sufficient future taxable profits in a foreseeable future allowing the use of existing tax losses carried forward and MAT credit entitlement.

4. Other Information

The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard' Report Corporate Governance and Shareholder's Information but does not include thefinancial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.

5. Management's responsibility for the financial statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance and cash flows ofthe Company in accordance with the accounting principles generally accepted in Indiaincluding the Accounting Standards specified under Section 133 of the Act read with Rule7 of the Companies (Accounts) Rules 2014 and the Companies (Accounting Standards)Amendment Rules 2016.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so. Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.

6. Auditor's responsibility for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.

• Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and (ii) to evaluate the effect of anyidentified misstatements in the financial statements.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

7. Report on other Legal and Regulatory requirements

I. As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of Section 143(11) of the Act ("the Order") and onthe basis of such checks of the books and records of the Company as we consideredappropriate and according to the information and explanations given to us we give in the"Annexure A" a statement on the matters specified in the paragraph 3 and 4 ofthe Order.

II. As required by Section143(3) of the Act we report that:

a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;

b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

c) The balance sheet the statement of profit and loss and the statement of cash flowsdealt with by this Report are in agreement with the books of account;

d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with specified under Section 133 ofthe Act read with Rule 7 of the Companies (Accounts) Rules 2014 and the Companies(Accounting Standards) Amendment Rules 2016;

e) On the basis of written representations received from the directors of the Companyand taken on record by the Board of Directors none of the directors is disqualified as on31 March 2019 from being appointed as a director in terms of Section 164 (2) of the Act;

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting; and

g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended:

In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Company to its directors during the year is inaccordance with the provisions of section 197 of the Act.

h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements;

ii. The Company did not have any long-term contracts including derivative contractshaving any material foreseeable losses; and

iii. There are no amounts required to be transferred to the Investor Education andProtection Fund by the Company during the year.

For MGB & Co. LLP
Chartered Accountants
Firm Registration Number: 101169W/W-100035
Sanjay Kothari
Partner
Membership Number 048215
Mumbai 2 May 2019

Annexure - A to the Independent Auditor's Report

Annexure referred to in paragraph 7(I) under "Report on other Legal and Regulatoryrequirements" of our report of even date to the members of LKP Finance Limited on thefinancial statements for the year ended 31 March 2019

i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) All the fixed assets have been physically verified by the management during theyear. In our opinion the frequency of verification is reasonable having regard to the sizeof the Company and nature of its assets. According to the information and explanationsgiven to us no discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and on the basis of ourexamination of records the title deeds of immovable properties are held in the name ofthe Company.

ii. As explained to us the inventories have been physically verified by the managementat the reasonable intervals during the year on the basis of statements received from thecustodians and depository participants and no discrepancies were noticed on verificationas compared to book records.

iii. According to information and explanation given to us the Company has not grantedany loans secured or unsecured to companies firms limited liability partnerships orother parties covered in the Register maintained under Section 189 of the Act.

iv. As the Company is a Non- Banking Finance Company being engaged in the business offinancing companies provisions of section 185 and Section 186 of the Act is notapplicable to the company. However the Company has complied with the provisions ofSection 186 of the Act with respect to investments made.

v. The Company has not accepted any deposits from the public within the meaning ofSections 73 to 76 of the Act.

vi. According to information and explanation given to us the Central Government ofIndia has not prescribed the maintenance of cost records under Section 148(1) of the Actfor any of the activities carried on by of the Company.

vii. According to the records of the Company examined by us and information andexplanations given to us:

a) Undisputed statutory dues including provident fund employees' state insuranceincome tax sales tax service tax duty of customs duty of excise value added taxgoods and service tax cess and others as applicable have been regularly deposited withthe appropriate authorities. There are no undisputed amounts payable in respect ofaforesaid dues outstanding as at 31 March 2019 for a period of more than six months fromthe date they became payable.

b) There are no dues of income tax sales tax service tax goods and service tax dutyof customs duty of excise value added tax and cess which have not been deposited onaccount of any dispute.

viii. According to the records of the Company examined by us and the information andexplanations given to us the Company has not defaulted in repayment of loans orborrowings to financial institutions or banks. The Company does not have any loans fromGovernment and has not issued any debentures during the year.

ix. In our opinion and according to the information and explanations given to us theCompany has not raised any money by way of initial public offer or further public offer(including debt instruments) or term loans during the year.

x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anyinstance of material fraud by the Company or on the Company by its officers or employeesnoticed or reported during the year nor have been informed of any such case by theManagement.

xi. According to the records of the Company examined by us and information andexplanations given to us the Company has paid/provided for managerial remuneration inaccordance with the requisite approvals mandated by the provisions of Section 197 readwith Schedule V to the Act.

xii. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company and the Nidhi Rules 2014 are not applicable to it.

xiii. According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with Sections177 and 188 of the Act and details of such transactions have beendisclosed in the financial statements as required by the applicable accounting standards.

xiv. According to the records of the Company examined by us and information andexplanations given to us the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures during the year.

xv. According to the records of the Company examined by us and information andexplanations given to us the Company has not entered into non-cash transactions withdirectors or persons connected with him.

xvi. The Company is registered as Non-banking financial institution (NBFI) and isholding a Certificate of Registration (CoR) from Reserve Bank of India to carry onbusiness of NBFI in terms of Section 45-IA of the RBI Act 1934.

For MGB & Co. LLP
Chartered Accountants
Firm Registration Number: 101169W/W-100035
Sanjay Kothari
Partner
Membership Number 048215
Mumbai 2 May 2019

Annexure - B to the Independent Auditor's Report

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Act as referred to in paragraph 7 (II)(f) under "Report on other Legal andRegulatory requirements" of our report of even date to the members of LKP FinanceLimited on the financial statements for the year ended 31 March 2019

We have audited the internal financial controls over financial reporting of LKPFinance Limited ("the Company") as of 31 March 2019 in conjunction with ouraudit of the financial statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India(ICAI). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.

Auditor's Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on "Audit of Internal Financial Controls over FinancialReporting" (the "Guidance Note") issued by the Institute of CharteredAccountants of India and the Standards on Auditing prescribed under Section 143(10) of theCompanies Act 2013 to the extent applicable to an audit of internal financial controls.Those Standards and the Guidance Note require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2019 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note issued by theInstitute of Chartered Accountants of India.

For MGB & Co. LLP
Chartered Accountants
Firm Registration Number: 101169W/W-100035
Sanjay Kothari
Partner
Membership Number 048215
Mumbai 2 May 2019